Lexus, Luger, and Singer each has submitted
an Offer of Settlement ("Offers") which the Commission has
determined to accept. Respondents acknowledge service of this Order
Making Findings and Imposing Remedial Sanctions as to Respondents Lexus
Financial Group, Inc., David Alan Luger, and Mark Lee Singer
("Order"). Respondents consent to the use of the findings
contained in this Order in this proceeding and in any other proceeding
brought by the Commission or to which the Commission is a party.1

III.

The Commission finds the following:

A. SUMMARY

Singer and Luger were principals and
registered associated persons ("APs") of Lexus, which
registered with the Commission as an independent introducing broker
("IB") on December 16, 1992. Over the course of four years,
Lexus solicited prospective customers primarily through the broadcast of
at least 56 thirty-minute radio advertisements
("infomercials"). Singer appeared in most of the Lexus
infomercials, which aired throughout the United States. When prospective
customers responded to the infomercials, Lexus APs, including Singer and
Luger, solicited them to buy options on futures contracts for the
commodities advertised in the infomercials ("commodity
options").

In both the infomercials and telephone
solicitations, Respondents fraudulently solicited customers and
prospective customers (collectively, "customers") by knowingly
misrepresenting and omitting material facts. Respondents overstated
customers' ability to exploit seasonal and other existing and known
supply and demand forces in the cash markets for various commodities in
order to profit on commodity options, downplayed the risk inherent in
such options, and overstated customers' performance records in
trading them. In fact, nearly 90% of Lexus' customers lost money,
resulting in total losses of approximately $6.8 million.

B. RESPONDENTS

Lexus Financial Group, Inc., is a
Florida corporation that employed approximately seven APs and conducted
business from 450 North Park Road, Suite 707, Hollywood, Florida 33021.
Lexus, which changed its name to Alexis Financial Group, Inc., on
September 10, 1997, was registered as an IB from December 16, 1992
through March 4, 1999.

David Alan Luger resides at 740
Champagne Place, Boca Raton, Florida 33422. Luger has been President, a
51% shareholder, and a principal of Lexus since its incorporation. Luger
was registered as an AP of Lexus from November 3, 1992 through March 4,
1999.

Mark Lee Singer resides at 570
Carrington Drive, Weston, Florida 33326. Singer has been Vice President,
a 40% shareholder, and a principal of Lexus since its incorporation.
Singer was registered as an AP of Lexus from November 3, 1992 through
March 4, 1999.

D. FACTS

1. The Lexus Infomercials

Radio infomercials were Lexus' primary
means of attracting customers. Virtually every Lexus customer
originally called as a result of hearing one of the infomercials. The
Lexus infomercials were the first contact that many customers had with
the firm or the commodities industry generally, and they provided the
first opportunity for customers to learn about the risks of commodity
options investing.

Every one of at least 56 Lexus radio
infomercials over a period of four years represented that the cash
price of the advertised commodity was about to go up because demand
would exceed supply, often due to seasonal patterns, e.g.,
demand for unleaded gasoline always increases in summer when people
take driving vacations, or demand for heating oil always increases in
autumn due to the impending onset of colder weather. The Lexus
infomercials then represented that Lexus customers who purchased
options on futures contracts in the commodity being advertised would
profit from these cash price increases, and suggested that there is a
one-to-one correlation between an increase in the cash price of a
commodity and the resulting profit to the holder of a commodity
option.

The Lexus infomercials repeatedly
identified a "standard" cash price movement for the
commodity, as well as the return that such a price movement purportedly
would yield to the holder of a commodity option. Each infomercial also
referred at least once to an extraordinary historical cash price
movement for the advertised commodity and/or an extraordinary return
that could be achieved by the holder of a commodity option in the event
the extraordinary price move occurred again.

Lexus' infomercials also downplayed
the risks involved with commodity options trading. The infomercials
mentioned only briefly that a customer could lose all or part of his
investment, and then immediately offset that statement with the
suggestion that one could manage the risk by taking advantage of
seasonal tendencies or other known supply and demand forces in the cash
market for the commodity.

2. The Telephone Sales Solicitations of
the Lexus APs

Singer and Luger hired APs with no prior
training or experience in analyzing commodity markets or in selling
commodity options. When Lexus APs talked to customers who responded to
the Lexus infomercials, the Lexus APs routinely repeated the
misrepresentations that the customers previously had heard in the
infomercials. In particular, Lexus APs: 1) promised an imminent
increase in the cash price of the advertised commodity; 2) indicated
that there is a direct correlation between the cash price movement of a
commodity and the resulting profit on a commodity option; 3) promised
customers large and virtually certain profits in a short period of
time; and 4) minimized the risk inherent in trading commodity options,
as general and fleeting references to risk were nullified by the
APs' assurances that purchasing commodity options with Lexus was
virtually risk-free.

Finally, in their telephone sales
solicitations to customers, Lexus APs often made misrepresentations
that overstated the performance records of Lexus' customers. In
fact, Lexus' actual trading results for its customers were
disastrous - from January 1, 1993 through June 30, 1996, nearly 90% of
the 823 accounts opened at Lexus lost money. Total losses in Lexus'
unprofitable accounts exceeded $6.8 million, while profits in
Lexus' profitable accounts totaled approximately $355,000.

3. Singer and Luger

a. Control of Lexus

Singer and Luger were the only two
corporate officers of Lexus. Together, they: 1) possessed final
authority in all hiring and firing decisions; 2) had the authority to
investigate, reprimand, and discipline Lexus APs; 3) controlled
Lexus' finances, were co-signatories of Lexus' corporate
checking account, and signed paychecks to employees; and 4)
established the commission rates paid by Lexus customers and the
compensation for Lexus APs and themselves. Singer and Luger each had
supervisory duties at Lexus, and each exercised a high degree of
corporate control at the firm.

b. The Role of Singer and Luger in the
Lexus Infomercials and Telephone Sales Solicitations

As Singer and Luger were getting the firm
off the ground in December 1992, Lexus' sales efforts focused on
options on coffee futures contracts. In their own telephone
solicitations during that early period, Singer and Luger presented a
uniform story about coffee, telling customers that: 1) an international
coffee committee would be meeting in a week or two and was going to try
to hold back some coffee so that the price of coffee was likely to go
up; 2) for every 5 or 10 cents that coffee went up, the holder of a
commodity option on coffee would make approximately $1,800 or $3,750,
respectively; and 3) coffee, which at the time was trading at about 80
cents, had in the past traded for $1.50. Over time, Singer and Luger
continued to engage in telephone solicitations of customers regarding
various commodity options, during which they also made most of the same
misrepresentations regarding profit potential, risk of loss, and
Lexus' performance record, as did the other Lexus APs.

Luger and Singer jointly decided to use
the infomercials at Lexus. Luger knew that most Lexus customers came to
the firm as a result of hearing those infomercials. Yet, Luger never
listened to any one of the Lexus infomercials in its entirety.

Singer appeared in most of the
infomercials with another Lexus AP, Todd Alan Thomas.2 When Thomas appeared alone in some live
infomercials that ran for a few months in 1994, Singer listened to
tapes of those infomercials shortly after they aired. Singer set up
Thomas as Lexus' on-air spokesperson in the infomercials, discussed
everything that was to be in the infomercials with Thomas in advance,
and actively encouraged some of the most exaggerated profit claims made
by Thomas. In a Lexus heating oil infomercial, for example, Singer
described Thomas' prediction of a ten-cent move in the heating oil
market as too pessimistic. And in a sugar infomercial, Singer urged
Thomas to "forget conservative" in describing the profit
potential of trading commodity options on sugar.

c. Knowledge of Singer and
Luger

Singer and Luger were aware of the results
of the option trades of Lexus' customers. Lexus received a daily
equity run from its futures commission merchant showing the positions
of each Lexus customer. In addition, Lexus received a duplicate of each
customer month-end account statement showing all open positions
(including the unrealized gain or loss on those positions) and whether
option positions that closed during the month were profitable or had
expired worthless.

Singer and Luger also were placed on
notice of the misleading nature of the Lexus infomercials on several
occasions. First, in mid-1994, Lexus retained a consulting firm to
review two Lexus infomercials for compliance with National Futures
Association ("NFA") Compliance Rule 2-29, which governs
communications between NFA members and the public. The consulting firm
presented its conclusions to Lexus in a written report dated September
26, 1994 ("Consultant Report"), which was read by both Singer
and Luger.

The Consultant Report specifically warned
Lexus that "one could infer from [its infomercial] statements that
an option customer would benefit from the full amount of the change in
the underlying commodity contract." The Consultant Report noted
the misimpression created by the statement in one of the infomercials
that "[w]e're looking, conservatively, for a ten-cent move [in
heating oil]. Folks, that would bring you back as much as $42,000 in
return on premium if you were to see a ten-cent move in the premium of
your option." The Consultant Report concluded:

When most of the advertisement centers on
the historical trend of the underlying commodity, it can be confusing
to switch to discussion of gains or losses in the option
premium. An unsophisticated investor could draw the conclusion that
the ten-cent rise in heating oil prices would result in $42,000 in
profits. In practice, it is highly unlikely that a ten-cent change in
heating oil prices would lead to a ten-cent change in the option
premium. (Emphasis in the original.)

Second, on July 15, 1995, Singer himself
conducted what he termed an "Independent Introducing Broker
Examination of Lexus Financial Group," and summarized his findings
in a written report ("IIBE Report") that Luger read shortly
after it was completed. The IIBE Report was a
"self-examination" by Singer and was the only internal audit
ever done at Lexus. In evaluating Todd Thomas' performances in the
infomercials, Singer wrote in his IIBE Report:

The review of the radio ads indicated that
on several occasions pie-in-the sky predictions regarding the
soybean market were presented. Note that all predictions must have a
reasonable basis in fact. A dollar move over the premium price would be
an extreme situation. You should present a more realistic view of the
investment. (Emphasis added.)

Third, Lexus received a letter from NFA
Compliance Department staff dated March 13, 1996, notifying Lexus of
several deficiencies in an infomercial on orange juice that Lexus had
aired ("March 13 letter"). The NFA's March 13 letter,
which both Singer and Luger read, specifically admonished that the
Lexus orange juice infomercial "did not disclose that option
prices do not always move in direct proportion to the price of the
underlying futures nor did it discuss option pricing characteristics
and its effect on profit potential." The NFA's March 13 letter
further warned that the infomercial "mentioned the risk of loss;
however, it was downplayed and the risk of loss was not mentioned in an
equally prominent manner as the potential for profit."

Finally, on May 16, 1996, NFA's Board
of Directors issued Notice I-96-11 ("NFA Notice"), a strong
statement that seasonality claims of the type made in the Lexus
infomercials violate NFA Compliance Rule 2-29:

Claims Regarding Seasonal Trades --
Some Members have suggested almost certain profits from so-called
seasonal trades in, among other things, heating oil and unleaded gas.
These ads cite historical data which supposedly shows that certain
trades produce dramatic profits year in and year out. Invariably,
however, the "historical data" involves different products,
different time frames or different fee structures. The most telling
point, by far, is that the firm's customers have never experienced
the types of profits touted by the Member.

The NFA Notice went on to state that
seasonality claims "present[] a distorted and misleading view of
the likelihood of customers earning dramatic profits by investing with
the Member firm, and . . . represent[] a clear violation of NFA sales
practice rules."

E. LEGAL DISCUSSION

1. Respondents Committed Fraud in Violation of Section
4c(b) of the Act and Regulation 33.10

Section 4c(b) of the Act and Section 33.10
of the Regulations, taken together, provide that it shall be unlawful,
in or in connection with an offer to enter into, the entry into, the
confirmation of the execution of, or the maintenance of,
exchange-traded commodity option transactions, to cheat or defraud, or
attempt to cheat or defraud, any other person. Liability requires proof
that a person or entity made misleading statements of, or omitted to
disclose, material facts with scienter, i.e., proof that
the respondent committed the alleged wrongful acts "intentionally
or with reckless disregard for his duties under the Act."
Hammond v. Smith Barney, Harris Upham & Co., Inc., [1987-1990
Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 24,617 at 36,657-59
(CFTC March 1, 1990). See alsoIn re Staryk, [Current
Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 27,206 at 45,810 (CFTC
Dec. 18, 1997) (scienter is a necessary element for options
fraud).

Statements made in solicitations to open
commodity option accounts meet the "in or in connection with"
requirement of Section 33.10 of the Regulations as do representations
made in the solicitation of specific orders. In re R&W Technical
Servs., [Current Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶
27,193 at 45,724-25 (CFTC Dec. 1, 1997). It is the "common
understanding" of the information conveyed that is examined to
determine if a misrepresentation has been made. Hammond, ¶
24,617 at 36,657 n.12; Staryk, ¶ 27,206 at
45,809-11.

a. Seasonal and Other Existing and Known
Supply and Demand

Forces Do Not Affect the Profitability
of Commodity Options

In infomercials and telephone
solicitations that echoed those infomercials, Respondents falsely
represented that customers would achieve large and certain profits by
purchasing options on futures contracts for commodities that are
subject to purportedly predictable price movements caused by seasonal
or other existing and known supply and demand forces. In fact, however,
known supply and demand forces in the cash market, including
predictable seasonal trends, do not necessarily affect the likelihood
of profit or the risk of trading commodity options because the markets
anticipate and account for those factors in the price paid for the
option and in the price of the option's underlying futures
contract. Bishop v. First Investors Group of the Palm Beaches,
Inc., [Current Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶
27,004 at 44,418 (CFTC March 26, 1997) ("[A] seasonal increase in
the demand for heating oil would not necessarily result in the
increased value of a heating oil option, because the market had already
factored seasonal demand into the price of an option. [These]
statements were misleading half-truths and thus violate Section 4c(b)
of the Act and Regulation § 33.10."). Thus, these
representations by Respondents are false.

b. There is No Direct Correlation between
an Increase in the

Price of a Commodity and Profits from
Trading Commodity Options

Respondents also falsely indicated that
there is a direct correlation between an increase in the price of a
commodity and the resulting profit to the holder of a call option for
that commodity. They suggested that the customer's strike price is
simply the price of the commodity at the time he purchases the option,
and that if the commodity's price increases from there, the
customer will profit accordingly.

In fact, however, price movements in the
cash and futures markets generally do not move in direct correlation,
and this non-correlation is generally even more pronounced between
price movements in the cash and options markets. Option values do not
usually move in the same manner or in direct proportion to the
underlying futures prices. In re JCC, Inc., [1992-1994 Transfer
Binder] Comm. Fut. L. Rep. (CCH) ¶ 26,080 at 41,576 (CFTC May 12,
1994), aff'd sub nom. JCC, Inc. v. CFTC, 63 F.3d 1557
(11th Cir. 1995) (statement "[e]very time sugar moves ten cents
you make $67,000" violated anti-fraud provisions of the Act and
Regulations); Bishop, ¶ 27,004 at 44,418 ("the
statements misrepresented the profit potential of such a seasonal
strategy by representing that a penny move in the underlying market
would translate into a $420 profit per option"); CFTC v.
Commonwealth Financial Group, 874 F. Supp. 1345, 1352 (S.D. Fla.
1994) (such statements "are deceptive because the movement of the
cash price or the underlying futures contract seldom produces a
directly proportional increase in the value of an option on that
futures contract"). Thus, these representations by Respondents are
false.

c. Respondents Made Fraudulent Profit
Claims, Minimized the Risk of

Trading, and Overstated the Performance
Record of Their Customers

In infomercials and telephone
solicitations, Respondents built on the foregoing misrepresentations by
exaggerating both the likelihood and the magnitude of profit that
purchasers of commodity options are likely to achieve. They also
minimized the risk of trading commodity options by emphasizing the
supposed advantage that knowledge of seasonal or other existing supply
and demand forces offers the options investor.3 These are very similar to
representations that have been held to be misleading:

Although Staryk does not explicitly state
that the predictable nature of the seasonal price trends in gasoline
and heating oil decreases the risk or increases the likelihood of
profits in options tied to those commodities, no reasonable consumer
could fail to take this message away from his sales
presentation.

It is well established that promises of
large and certain profits, like the promises made by Respondents in
their infomercials and telephone solicitations, are fraudulent.
Munnell v. Paine Webber Jackson & Curtis, [1986-1987 Transfer
Binder] Comm. Fut. L. Rep. (CCH) ¶ 23,313 at 32,863 (CFTC Oct. 8,
1986) (statements that an investor could conservatively expect a profit
of 32% per year amount to a guarantee of profitability and are
inherently fraudulent); CFTC v. Commonwealth, 874 F. Supp. at
1353 (combining claims that risks are subject to certain limitations,
with "predictions of profit [that] exceeded `mere
optimism'" violated Section 4c(b) of the Act and Section 33.10
of the Regulations); Levine v. Refco, Inc., [1987-1990 Transfer
Binder] Comm. Fut. L. Rep. (CCH) ¶ 24,488 at 36,115 (CFTC July 11,
1989) ("bold predictions of significant profit coupled with claims
that risks are subject to specific limitations amounts to the type of
guarantee of profits" that are prohibited).

d. Respondents' Misrepresentations
were Material

A statement is material if it is
substantially likely that a reasonable investor would consider the
matter important in making an investment decision. Sudol v. Shearson
Loeb Rhoades Inc., [1984-1986 Transfer Binder] Comm. Fut. L. Rep.
(CCH) ¶ 22,748 at 31,119 (CFTC Sept. 30, 1985). Respondents'
claims regarding the purported ability to exploit existing and known
cash market conditions (including seasonality), and the correlation
between cash price movements and profits on commodity options, went to
the heart of option purchasers' decisions to invest.

The misstatements by Respondents regarding
profit potential, risk of loss, and their performance record also were
material. JCC, ¶ 26,080 at 41,576 n.23 ("When the
language of a solicitation obscures the important distinction between
the possibility of substantial profit and the probability that it will
be earned, it is likely to be materially misleading to
customers"); CFTC v. British Am. Commodity Options Corp.,
[1977-1980 Transfer Binder] Comm Fut. L. Rep. (CCH) ¶ 20,662 at
22,701 (S.D.N.Y. 1978) ("[U]nsupported and unreasonable
predictions [of dramatic price shifts] unmistakably implied the
near-certainty of sizeable and immediate returns, and were thus
materially misleading to potential investors"); CFTC v.
Commonwealth, 874 F. Supp. at 353-54 (misrepresentations regarding
the trading record and experience of a firm or broker are fraudulent
because past success and experience are material factors to reasonable
investors).

e. Respondents Acted with
Scienter

Scienter requires proof that the
respondent committed the alleged wrongful acts "intentionally or
with reckless disregard for [his] duties under the Act."
Hammond, ¶ 24,617 at 36,659. A reckless statement is one made
with so little care that it is "very difficult to believe the
[actor] was not aware of what he was doing." Do v. Lind-Waldock
& Co., [1994-1996 Transfer Binder] Comm. Fut. L. Rep.
(CCH) ¶ 26,516 at 43,321 (CFTC Sept. 27, 1995), quoting
Drexel Burnham Lambert v. CFTC, 850 F.2d 742, 748-49 (D.C. Cir.
1988). A finding of intentional wrongdoing may be supported by
inferences from circumstantial evidence. JCC, ¶ 26,080 at
41,579; In re Miller, [1994-1996 Transfer Binder] Comm. Fut. L.
Rep. (CCH) ¶ 26,440 at 42,914 (CFTC June 16, 1995).

Respondents knew that their customers did
not make anywhere near the profits they advertised in their
infomercials and telephone solicitations. The trading results of
Lexus' own customers were disastrous, and belied Respondents'
claims of tremendous profit potential with only a modest risk of loss.
From January 1, 1993 through June 30, 1996, nearly 90% of Lexus
customer accounts lost money. Total losses in Lexus' unprofitable
accounts exceeded $6.8 million, while profits in Lexus' profitable
accounts totaled approximately $355,000. These actual trading results
revealed that Lexus customers did not benefit from seasonal or other
existing and known supply and demand forces in the cash market, and did
not profit from any correlation between commodity price increases and
options profits.

Respondents also received specific and
ample notice of the serious deficiencies in the Lexus infomercials: 1)
in 1994, the Consultant Report admonished Respondents about the
infomercials' claims of a direct, one-to-one correlation between
cash price movements and resulting profits on commodity options; 2) in
1995, Singer's own IIBE Report expressed concern regarding
"pie-in-the sky predictions" in the infomercials; and 3) in
1996, both NFA's March 13 Letter and the NFA Notice warned of the
problems with the seasonality approach utilized in the Lexus
infomercials. Despite these blunt warnings, though, each Lexus
infomercial continued to exhibit the same defects as those that had
aired before. Accordingly, the Respondents acted with
scienter.

2. Lexus is Liable for Violations of the Anti-Fraud Provisions
of

Section 4c(b) of the Act and Regulation 33.10 Committed by
its APs

Lexus is liable for the acts, omissions
and failures of Singer, Luger, and the Lexus APs that occurred within
the scope of each such person's employment or office with Lexus
pursuant to the respondeat superior liability provisions of
Section 2(a)(1)(A)(iii) of the Act, 7 U.S.C. § 2 (1994), and
Section 1.2 of the Regulations, 17 C.F.R. § 1.2 (1999). The
corporation, as principal, is strictly liable for the misconduct of its
employees and agents, Stotler and Co. v. CFTC, 855 F.2d
1288, 1292 (7th Cir. 1988), and the "only question is whether the
[misconduct] was within the scope of his agency." Rosenthal
& Co. v. CFTC, 802 F.2d 963, 967 (7th Cir. 1986). The
violations of Section 4c(b) of the Act and Section 33.10 of the
Regulations discussed above indisputably occurred within the scope of
Singer's, Luger's, and the Lexus APs' respective employment
or office with Lexus, and Lexus is thereby liable for them. SeeReed v. Sage Group, Inc., [1987-1990 Transfer Binder] Comm. Fut.
L. Rep. (CCH) ¶ 23,943 at 34,299-300 (CFTC Oct. 14, 1987).

3. Singer and Luger Aided and
Abetted Violations of the

Anti-Fraud Provisions of Section 4c(b) of the Act and
Regulation 33.10

To be liable as an aider and abettor under
Section 13(a) of the Act, 7 U.S.C. § 13c(a) (1994), a respondent
"must knowingly associate himself with an unlawful venture,
participate in it as something that he wishes to bring about and seek
by his actions to make it succeed." In re Commodities
International Corp., [Current Transfer Binder] Comm. Fut. L. Rep.
(CCH) ¶ 26,943 at 44,564 (CFTC Jan. 14, 1997). Here, Singer aided
and abetted Todd Thomas' material misrepresentations in the Lexus
infomercials by making his own fraudulent misrepresentations in those
same infomercials, as discussed above. Further, Singer discussed
everything that was to be in the infomercials with Thomas in advance,
and he actively encouraged some of Thomas' most exaggerated profit
claims.

Both Singer and Luger aided and abetted
the misrepresentations of the Lexus APs in their telephone sales
solicitations to customers by orchestrating the fraudulent conduct at
Lexus from the time they started the company. The initial fraudulent
coffee solicitation by Singer and Luger in their early sales calls
became the model for the Lexus infomercials and the subsequent
telephone sales solicitations of other Lexus APs that echoed those
infomercials. Lexus APs, who generally had no prior experience in the
futures industry, did not attend any formal training programs. Rather,
the new APs' training came from listening and learning from Singer,
Luger, and the APs already at Lexus -- who, in turn, had been trained
by Singer and Luger. Singer and Luger led by example as they made the
same material misrepresentations themselves, Singer in the infomercials
and both Singer and Luger in their own telephone sales solicitations
with customers.

Singer and Luger participated in the
fraudulent solicitations of customers by Lexus APs as something that
they wished to bring about, and they benefited financially from these
successful fraudulent sales efforts. By virtue of these actions, they
satisfied the aiding and abetting standard of knowing association and
purposeful participation in the violative conduct. See
generally, In re Richardson Securities, Inc., [1980-1982
Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 21,145 at 24,646 (CFTC
Jan. 27, 1981); In re Lincolnwood Commodities, Inc. of
California, [1982-1984 Transfer Binder] Comm. Fut. L. Rep. (CCH)
¶ 21,986 at 28,253-54 (CFTC Jan. 31, 1984). Singer and Luger,
therefore, aided and abetted violations of the anti-fraud provisions of
the Act and Regulations and are responsible for them pursuant to
Section 13(a) of the Act.

4. Singer and Luger are Liable as Controlling Persons for
Violations of the

Anti-Fraud Provisions of Section 4c(b) of the Act and
Regulation 33.10

To be liable as a controlling person under
Section 13(b) of the Act, 7 U.S.C. § 13c(b) (1994), a respondent
must possess the requisite degree of control and either: 1) knowingly
induce, directly or indirectly, the acts constituting the violation; or
2) fail to act in good faith. In re Apache Trading Corp.,
[1990-1992 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 25,251 at
38,794 (CFTC March 11, 1992). Knowing inducement requires a showing
that "the controlling person had actual or constructive knowledge
of the core activities that constitute the violation at issue and
allowed them to continue." In re Spiegel, [1987-1990
Transfer Binder] Comm. Fut. L. Rep. (CCH), ¶ 24,103 at 34,767
(CFTC Jan. 12, 1988). A controlling person fails to act in good faith
if, for example, he does not maintain and enforce an adequate system of
supervision over his employees. Apache Trading, ¶ 25,251 at
38,794-95.

Singer and Luger possessed the ability to
set corporate policy, to hire and fire, to control corporate accounts,
to set commission rates and AP salaries, and to control day-to-day
corporate operations, which establishes their control for purposes of
Section 13(b) of the Act. SeeSpiegel, ¶ 24,103 at
34,768 (respondent was founder, president, sole shareholder and sole
authorized signatory, and possessed ultimate authority to hire and
fire); In re GNP Commodities, Inc., [1990-1992 Transfer
Binder] Comm. Fut. L. Rep. (CCH) ¶ 25,360 at 39,216 (CFTC Aug. 11,
1992), aff'd in pertinent part sub nom., Monieson v.
CFTC, 996 F.2d 852 (7th Cir. 1993) (respondent was founder,
co-owner, chairman of the board and majority shareholder, had
day-to-day control including hiring and firing decisions, set salary
levels, resolved disputes regarding commissions, and supervised and
gave instructions to top managers).

Singer and Luger are liable as controlling
persons for the misrepresentations in the Lexus infomercials, Singer
because he knowingly induced them and Luger because he failed to act in
good faith. Singer had actual knowledge of Thomas' material
misrepresentations in the Lexus infomercials, as Singer appeared in
most of them and listened to tapes of the live infomercials that Thomas
did on his own for a few months in 1994. Yet, Singer allowed these
misrepresentations to continue through at least 56 infomercials over
four years. Singer thereby knowingly induced Thomas' material
misrepresentations in the Lexus infomercials for purposes of
controlling person liability pursuant to Section 13(b) of the
Act.

Luger knew that most Lexus customers came
to the firm as a result of hearing the infomercials, yet he paid little
or no attention to the content of the infomercials on which his
firm's customer base ultimately depended. Luger's reckless
disregard of what Singer and Thomas were telling customers to bring
them to Lexus evinced a lack of good faith with respect to the Lexus
infomercials for purposes of controlling person liability pursuant to
Section 13(b) of the Act.

Both Singer and Luger also knowingly
induced the misrepresentations by the Lexus APs in the telephone sales
solicitations. Singer and Luger acquired actual knowledge of the
APs' misrepresentations by walking around the office and monitoring
the solicitations while listening to the APs talk to customers on the
phone. Yet, far from stopping the fraudulent practices at Lexus, Singer
and Luger not only allowed them to continue but contributed to them by
committing those very same offenses themselves in their own sales
calls. Singer and Luger thereby knowingly induced the Lexus APs'
material misrepresentations in their telephone solicitations for
purposes of controlling person liability pursuant to Section 13(b) of
the Act.

Regulation 166.3, 17 C.F.R. § 166.3
(1999), imposes a duty of diligent supervision upon each Commission
registrant (except APs who have no supervisory duties). Singer, Luger
and Lexus each had supervisory duties. The "focus of any
proceeding to determine whether Rule 166.3 has been violated will be on
whether such review occurred and, if it did, whether it was
`diligent.'" In re Paragon Futures Ass'n.,
[1990-1992 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 25,266 at
38,850 (CFTC April 1, 1992).

Singer and Luger did not prohibit or
correct the material misrepresentations in the Lexus infomercials or
the telephone sales solicitations of the Lexus APs. Rather, they aided,
abetted, participated in, and encouraged them. SeeCFTC v.
Trinity Financial Group, Inc., [Current Transfer Binder] Comm. Fut.
L. Rep. (CCH) ¶ 27,179 at 45,635 (S.D. Fla. 1997) (respondents
failed to establish and maintain meaningful procedures for deterring
and detecting fraud by their employees, and knew of specific incidents
of misconduct but failed to take reasonable steps to correct the
problems in violation of Regulation 166.3).

The extent of the supervisory review at
Lexus was limited to the one-time IIBE Report, which was an isolated
and cursory audit by Singer. Despite the IIBE Report's criticism of
Lexus' infomercials, Respondents conducted no further review of the
infomercials and made no changes to the content of the infomercials as
a result of the IIBE Report. Other than the IIBE Report, Lexus issued
no reprimand or criticism of any of its APs. Nor did it take any
disciplinary or corrective action, or implement any internal controls,
as a result of any customer complaint or reparations action against
Lexus or its APs. The repeated and manifest nature of the
misrepresentations in the 56 Lexus infomercials and the APs'
telephone sales solicitations over a four-year period further establish
Lexus' failure to supervise diligently. SeeParagon,
¶ 25,266 at 38,850 ("evidence of the occurrence of violations
. . . is probative of a firm's failure to supervise, if the
violations which occurred are of a type which should be detected by a
diligent system of supervision, either because of the nature of the
violations or because the violations occurred repeatedly").

IV.

OFFER OF SETTLEMENT

Respondents Lexus, Luger, and Singer have
each submitted an Offer of Settlement in which they:

1. Acknowledge service of the Complaint
and this Order;

2. Admit the jurisdiction of the
Commission with respect to all matters set forth in the Complaint and
this Order;

3. Admit the findings of this
Order;

4. Waive:

(a) any further hearings;

(b) all post-hearing procedures;

(c) judicial review by any court;

(d) any objection to the staff's
participation in the Commission's consideration of their
respective Offers;

(e) any claim of Double Jeopardy based
upon the institution of this proceeding or the entry in this
proceeding of any order imposing a civil monetary penalty or any
other relief; and

(f) all claims which they may possess
under the Equal Access to Justice Act, 5 U.S.C. § 504 (1994) and
28 U.S.C. § 2412 (1994), as amended by Pub. L. No. 104-121,
§§ 231-232, 110 Stat. 862-863, and Part 148 of the
Regulations, 17 C.F.R. §§ 148.1 et seq. (1999),
relating to, or arising from, this action, and they shall not assert
any right under the Equal Access to Justice Act to seek costs, fees,
or other expenses relating to, or arising from, this
proceeding;

5. Stipulate that the record basis on
which this Order is entered consists of the Complaint, the Joint
Stipulations of Facts filed September 9, 1998, the Consent Order issued
April 9, 1999,4 this Order, and
the findings they have admitted in their respective Offers, which are
incorporated in this Order; and

6. Consent to the issuance of this Order,
which makes findings and orders:

a. Lexus, Luger, and Singer to cease and
desist from violating Section 4c(b) of the Act and Sections 33.10 and
166.3 of the Regulations;

b. Revocation of Lexus' registration
as an IB and the registrations of Luger and Singer as APs of
Lexus;

c. Lexus, Luger, and Singer to be
permanently prohibited from trading on or subject to the rules of any
contract market, and directs all contract markets to refuse Lexus,
Luger, and Singer trading privileges, beginning on the third Monday
after the date of this Order;

d. Lexus, Luger, and Singer to comply
with their undertakings as set forth in their respective Offers;
and

e. Luger and Singer to pay, jointly and
severally, restitution of up to $6,809,046.53, plus prejudgment
interest thereon in the amount of $1,804,523.91, for a total amount
of up to $8,613,570.44, in accordance with the terms set forth in
Section VI.3 below.

V.

FINDINGS OF VIOLATIONS

On the basis of the admissions evidenced by
the Offers, the Stipulations filed September 9, 1998, and the Consent
Order issued April 9, 1999, the Commission finds that Lexus, Luger, and
Singer violated Section 4c(b) of the Act, 7 U.S.C. § 6c(b) (1994),
and Sections 33.10 and 166.3 of the Regulations, 17 C.F.R. §§
33.10, 166.3 (1999).

2. Lexus' registration as an IB and
the registrations of Luger and Singer as APs of Lexus are hereby
revoked;

3. Beginning on the third Monday after the
date of this Order, Lexus, Luger, and Singer shall be prohibited from
trading on or subject to the rules of any contract market, and all
contract markets shall refuse Lexus, Luger, and Singer trading
privileges;

4. Luger and Singer shall pay, jointly and
severally, restitution to their customers of up to $6,809,046.53, plus
prejudgment interest thereon in the amount of $1,804,523.91, for a
total amount of up to $8,613,570.44. The amount of the respective
Annual Payments by Luger and Singer shall consist of a portion
of:

1) the adjusted gross income (as defined
by the Internal Revenue Code) earned or received by Luger and Singer,
respectively, during the course of the preceding calendar year; plus
2) all other net cash receipts, net cash entitlements or net proceeds
of non-cash assets received by Luger and Singer, respectively, during
the course of the preceding calendar year. The respective Annual
Payments will be determined as follows:

Where Adjusted Gross Income Plus
Net Cash Receipts Total:

Percent of Total to be Paid by
Luger and Singer, Respectively, to Customers is:

Up to $50,000

0%

$50,001-$100,000

30% of the amount above $50,000

Above $100,000

$15,000 (30% of the amount between
$50,000 and $100,000) plus 40% of the amount above $100,000;

Luger and Singer shall make their
respective Annual Payments to an account designated by a monitor
designated by the Commission (the "Monitor") on or before
July 31 of each calendar year, starting in calendar year 2000 and
continuing for five (5) years5
(or until his obligation to make the Annual Payments is discharged if
that happens first).6 Such funds
shall be distributed annually as restitution payments to Lexus'
customers in the amounts calculated by the Monitor, unless, at its
sole discretion, based upon the amount of funds available for
distribution, the Monitor decides to defer distribution. If, at the
end of the five-year payment period, any part of the Annual Payments
has not been distributed, the Monitor shall either distribute the
funds in the account or make a recommendation to the Commission that
the funds instead become a civil monetary penalty pursuant to Section
6(c) of the Act. In the event the Commission rejects the
Monitor's recommendation, the funds shall be distributed as
restitution.

5. The Commission notes that an order
imposing a civil monetary penalty and requiring immediate payment of
restitution against Lexus, Luger, and Singer would be appropriate in
this case, but does not do so based upon their financial condition.
Lexus, Luger, and Singer acknowledge that the Commission's
acceptance of their Offers is conditioned upon the accuracy and
completeness of the sworn Financial Statement and other evidence they
have provided regarding their financial condition. Lexus, Luger, and
Singer each consent that if at any time following the entry of the
Order, the Division obtains information indicating that his or its
representations concerning his or its financial condition were
fraudulent, misleading, inaccurate, or incomplete in any material
respect at the time they were made, the Division may, at any time
following the entry of the Order, petition the Commission to:
1) reopen this matter to consider whether that Respondent
provided accurate and complete financial information at the time such
representations were made; 2) determine the amount of
civil monetary penalty to be imposed against that Respondent;
3) if that Respondent is Luger or Singer, require immediate
payment of restitution by Luger or Singer, or, if that Respondent is
Lexus, determine the amount of restitution to be imposed; and
4) seek any additional remedies that the Commission would be
authorized to impose in this proceeding if the Offer of that Respondent
had not been accepted. No other issues shall be considered in
connection with this petition other than whether the financial
information provided by that Respondent was fraudulent, misleading,
inaccurate, or incomplete in any material respect, the amount of civil
monetary penalty to be imposed against that Respondent, and whether any
additional remedies should be imposed. Respondent may not, by way of
defense to any such petition, contest the validity of, or the findings
in, this Order, contest the allegations of the Complaint or the amount
of restitution to be paid, or assert that payment of a civil monetary
penalty should not be ordered;

6. Luger and Singer shall immediately
comply with the following undertakings:

a. Luger and Singer each shall provide
his respective sworn financial statement to the Monitor on June 30
and December 31 of each calendar year, starting June 30, 2000, and
continuing through and including December 31, 2003. The financial
statement shall provide a true and complete:

i. itemization of all of Luger's
and Singer's respective rights, title and interest in (or
claimed in) any asset, wherever, however and by whomever
held;

ii. itemization, description and
explanation of all transfers of assets with a value of $1,000 or
more made by or on behalf of Luger and Singer, respectively, over
the preceding six-month interval; and

iii. detailed description of the
source and amount of all of Luger's and Singer's respective
income or earnings, however generated.

Luger and Singer each shall also
provide the Monitor with complete copies of his respective signed
federal income tax return, including all schedules and attachments
thereto (e.g., IRS Forms W-2) and Forms 1099, as well as any
filings he is required to submit to any state tax or revenue
authority, on or before June 30 of each calendar year, or as soon
thereafter as the same are filed. If Luger or Singer moves his
residence at any time, he shall provide written notice of the new
address to the Monitor and the Commission within ten (10) days
thereof;

b. Luger and Singer each shall cooperate
fully and expeditiously with the Monitor and the Commission in
carrying out all aspects of his respective restitution Annual
Payments. They each shall cooperate fully with the Monitor and the
Commission in explaining his respective financial income and
earnings, status of assets, financial statements, asset transfers,
tax returns, and shall provide any information concerning himself as
may be required by the Commission. Furthermore, Luger and Singer
shall provide such additional information and documents with respect
thereto as may be requested by the Monitor or the Commission;

c. Luger and Singer shall not transfer
or cause others to transfer funds or other property to the custody,
possession, or control of any member of Luger's or Singer's
family or any other person for the purpose of concealing such funds
or property from the Monitor or the Commission;

d. Lexus, Luger, and Singer shall never
apply for registration or claim exemption from registration with the
Commission in any capacity, and shall never engage in any activity
requiring such registration or exemption from registration, or act as
a principal, agent or officer of any person registered, exempted from
registration or required to be registered with the Commission;
and

e. Neither Lexus, Luger, or Singer, nor
any of their respective agents or employees under their authority or
control, shall take any action or make any public statement denying,
directly or indirectly, any allegation in the Complaint or any
finding in this Order, or creating, or tending to create, the
impression that the Complaint or Order is without a factual basis;
provided, however, that nothing in this provision shall affect: (i)
the testimonial obligations of Lexus, Luger, and Singer; or (ii)
their right to take legal positions in other proceedings to which the
Commission is not a party.

Unless otherwise specified, the provisions
of this Order shall be effective on this date. Copies of this Order shall
be served on Lexus, Luger, and Singer, on all contract markets, and on
the NFA.

By the Commission

Dated: February 17, 2000

________________________________

Jean A. Webb

Secretary to the Commission

Commodity Futures Trading
Commission

NOTES:

1
Respondents do not consent to the use of the Offers, the findings
consented to in the Offers, or this Order, as the sole basis for any
other proceeding brought by the Commission other than in a proceeding to
enforce the terms of this Order. Nor do Respondents consent to the use of
the Offers, the findings consented to in the Offers, or this Order, by
any other party in any other proceeding.

2 On
November 3, 1999, in other proceedings, the Commission issued an Order
accepting an Offer of Settlement from Todd Thomas and finding that Thomas
committed fraud in violation of Section 4c(b) of the Act and Section
33.10 of the Regulations in his infomercials and telephone sales
solicitations both at Lexus and at a separate IB firm established by
Thomas. See Order Making Findings and Imposing Remedial Sanctions
as to Respondents Todd Alan Thomas and Wellington Financial Group, Inc.,
CFTC Docket Nos. 98-13, 99-10 (CFTC Nov. 3, 1999).

3
Fraud exists although a statement may be literally true if, when
"recited repeatedly as a sales inducement . . . the representation
inflates the likelihood of profit while minimizing the risk of
loss . . ." Staryk, ¶ 27,206 at 45,809; Bishop,
¶ 27,004 at 44,841 (emphasis in the original). Accord,
Swickard v. A.G. Edwards & Sons, [1984-1986 Transfer Binder]
Comm. Fut. L. Rep. (CCH) ¶ 22,522 at 30,275 (CFTC Mar. 7, 1985)
("[H]alf of the truth may obviously amount to a lie if it is
understood to be the whole"), quoting Prosser & Keeton,
The Law of Torts, 738 (1984).

4
On April 9, 1999, the Administrative Law Judge ("ALJ") entered
a Consent Order Granting the Division of Enforcement's Motions for
Partial Summary Disposition ("Consent Order") based in part on
Joint Stipulations of Facts ("Stipulations") entered into by
the Respondents. In his Order, the ALJ found that: 1) with respect to the
Lexus infomercials, Singer and Lexus committed fraud in violation of
Section 4c(b) of the Act and Section 33.10 of the Regulations, Singer
aided and abetted Lexus' fraud, and Singer and Luger were liable as
controlling persons for Lexus' fraud; 2) with respect to Lexus'
telephone sales solicitations of customers, Lexus APs (including Singer
and Luger) made material misrepresentations and omissions in or in
connection with commodity option transactions, and Singer and Luger were
controlling persons of Lexus with respect to the APs' telephone
solicitations; and 3) Lexus, Luger, and Singer failed to diligently
supervise the Lexus infomercials and the Lexus APs' telephone sales
solicitations to customers in violation of Section 166.3 of the
Regulations.

5
The five-year restitution period shall run from January 1, 1999 through
December 31, 2003. Restitution payments for a calendar year shall take
place by July 31 of the following year. Therefore, the final restitution
payment for the year 2003 will occur on or before July 31, 2004.

6
The NFA is hereby designated as the Monitor for a period of six years
from the date of this Order. Notice to the Monitor shall be made to
Daniel A. Driscoll, Esq., Vice President, Compliance, or his successor,
at the following address: National Futures Association, 200 West Madison
Street, Chicago, IL 60606. For five years, based on the information
contained in Luger's and Singer's respective sworn financial
statements, tax returns, and the other financial statements and records
provided to the Monitor, the Monitor shall calculate the total amount of
restitution to be paid by Luger and Singer, respectively, for that year
and the specific amounts payable to each customer. On or before July 31
of each year and starting in calendar year 2000, the Monitor shall send
written notices to Luger and Singer with instructions to pay immediately
the amount of restitution to an account designated by the Monitor. In the
event Luger or Singer makes payments to any of the customers, which
payments have not been directed by the Monitor, the Commission and
Monitor shall reduce that Respondent's total restitution obligation
upon receipt from the customer of a signed written acknowledgment stating
the amount paid.